© Reuters. FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at its headquarters in Washington, DC, U.S. May 12, 2021. REUTERS/Andrew Kelly/File Photo
By Douglas Gilson
(Reuters) – Republican lawmakers on Wednesday pushed Wall Street’s top regulator to justify his agency’s efforts to regulate corporate climate disclosures and criticized the U.S. Securities and Exchange Commission for what they called a early regulation.
During an appearance before a House of Representatives panel overseeing federal spending, SEC Chairman Gary Gensler defended the agency’s request for a 12% budget increase to address the flourishing growth of financial markets and the growing risk of misconduct.
Gensler said that with the frequency of stock market trading and the skyrocketing volume of privately managed assets, “we need to be able to respond to the bad actors game.” He also described cryptocurrency markets as a “Wild West” that was “rife with non-compliance.”
It was his first testimony since Republicans took control of the lower house of Congress in November, bringing some of his staunchest critics into the majority.
Conservative lawmakers and commentators cast Gensler as an interventionist regulator who burdens the markets with left-wing social policies unrelated to money.
Last year, the SEC proposed requiring publicly traded companies to disclose climate-related financial impacts, including physical risks from weather events, as well as the carbon emissions that they, their suppliers of energy and their suppliers produce. The agency cited widespread demand and emerging consensus among international regulators.
The industry has fiercely opposed aspects of the rule, including farmers who fear having to report emissions to customers covered by the rule. Republican lawmakers have also repeatedly challenged the securities regulator’s legal authority to mandate climate disclosures.
“Why is the SEC getting involved in emissions with this climate change? asked Alabama Republican Jerry Carl. “I’m not a fan of it.”
Gensler said investors as a whole are now demanding and many companies are providing climate information.
“Our role is to ensure that these disclosures…that investors get are not misleading,” he said.
Carl cited Gensler’s past remarks that the definition of so-called Scope III emissions outlined in the 2022 proposal, which would govern carbon generated in corporate supply chains, was “not well developed”, sparking speculation that the Commission may water down or entirely eliminate this part of the proposal as some have demanded in sectors such as retail and aerospace.
Gensler said he didn’t want to “prejudge” the rulemaking process. “He tries to bring some consistency to these disclosures,” he said.
Gensler described the $2.4 billion request for fiscal year 2024 as marking a continued recovery from the decline. Under former President Donald Trump’s administration, he said, enrollment fell 4%. With about 5,300 positions now, the agency’s staffing is only 3% higher than it was before Trump took office, according to Gensler.
Lawmakers asked him about the findings of a recent internal oversight report that found staff attrition and a heavy workload put the quality of rulemaking at risk.
Gensler said the turnover was driven in part by the desirability of SEC employees in a competitive job market.
“We’re currently managing around 6% attrition, which is consistent with other agencies,” he said.
The final budget will be determined by a tightly divided Congress, now deadlocked over increasing federal borrowing limits. The SEC regularly tells lawmakers that its budget is “deficit neutral” since its spending is offset by market-assessed transaction fees.
(This story has been reclassified to correct a typographical error at Gensler said, not Gensler said, in paragraph 3)